Sprint held talks with 4 companies before clinching Softbank deal

February 5, 2013 | By Phil Goldstein

For a little more than a year before Sprint Nextel (NYSE:S) struck a deal with Softbank, it held merger and strategic partnership talks with four companies, according to a regulatory filing. Two of those companies were likely Dish Network (NASDAQ: DISH) and MetroPCS (NYSE:PCS), though Sprint is not disclosing the names of its would-be partners.

In a proxy filing with the Securities and Exchange Commission, Sprint detailed its deal-making from roughly September 2011 up until it announced the Softbank transaction as well as its $2.2 billion deal to acquire Clearwire (NASDAQ:CLWR). Softbank is seeking to acquire 70 percent of Sprint for $20.1 billion, and still regulators need to approve both the Softbank and Clearwire deals, which Sprint expects to close by mid-year.

According to Sprint's filing, between September 2011 and February 2012, Sprint discussed a potential combination with "Company W," but the discussions did not result in a transaction. Company W is most likely MetroPCS, since a potential deal between the two companies first came to light in late February 2012. The filing states that as late as September 2012 a deal with Company W was considered as an alternative to a deal with Softbank but that such an option was eventually discarded.

The filing also notes that from May through September 2011, Sprint discussed with "Company X" a transaction in which Sprint would acquire additional spectrum from Company X, the shareholders of Company X would receive substantial equity in Sprint, and Sprint and Company X would enter into other commercial arrangements. It is unclear which firm Company X is, but it appears the deal never went anywhere.

Additionally, the filing also notes that in May 2012 Sprint began talking with "Company Y" about a potential business combination and a joint venture. Sprint's discussions with Company Y continued periodically through Sept. 6, 2012, but ultimately did not lead to a transaction. When Softbank first approached Sprint in July 2012 there was talk of a potential three-party transaction among Sprint, Softbank and Company Y.

Finally, Sprint notes that from May 2012 until September 2012, Sprint discussed with "Company Z" spectrum partnering opportunities. Company Z is likely Dish Network; Bloomberg reported in December that two firm held talks on the possibility of Sprint hosting Dish's spectrum on its network. The filing reveals that Keith Cowan, formerly Sprint's president of strategic planning and corporate initiatives, had talks in September with the CEO of Company Z. At the time, the CEO said that "he was currently focusing on certain regulatory issues affecting Company Z, that Company Z would require a significant period of due diligence before considering any business combination with Sprint and that he believed that Sprint's then existing market price was in excess of his view of Sprint's fundamental value."

That description, especially regarding the regulatory issues, seems to fit the profile of Dish. Last fall Dish was engaged in intense wrangling with the FCC over the final rules governing the terrestrial use of its AWS-4 spectrum, which Dish wanted to use to build a mobile broadband network.

The filing reveals that Softbank made an offer for Sprint on Sept. 11, in a deal valued at $19.2 billion. Over the next several weeks Sprint and Softbank hammered out the final terms of the deal, which was first rumored Oct. 11 and then announced Oct. 15.